Intel-AMD deal doesn’t end the bitter war

Updated: God alone knows how much lawyers have benefited from the latest spat between AMD and Intel.

Today the two companies announced a settlement and an extension of a five year cross license agreement, and the cessation of hostilities in other courts around the world. But AMD still has some complaints that haven’t been settled by the agreement and it will continue to push for regulators to resolve these. The agreement has not yet been published but will be shortly.

It was always on the cards that the two would settle – they’ve both been through lengthy bouts of litigation before. And to some extent Intel was on the ropes here – a torrent of cases from regulatory authorities as well as civil actions made it seem that the chip giant would never escape from being accused of antitrust agreement somewhere or other in the world.

Dirk Meyer, AMD’ CEO, said in a conference call today that there are three components to the agreement. It’s agreed to a set of ground rules, we’ve agreed to a new patent cross license agreements using multiple foundries, and Global Foundries has agreed to terms to continue as a foundry. Intel has agreed to pay AMD $1.25 billion.

He said that the game has changed for AMD. He said the agreement was important for customers and for consumers worldwide. It ends many years of litigation. He said he would like to thank the regulatory agents around the world for their consistency. He implied that they’d still be keeping a watch on Intel’s activities. The regulators will do what they’re there to do. AMD is withdrawing from all pending litigation, withdrawing all complaints and to a great extent it resolves the antitrust difficulties. There are “some practices” it believes were exclusionary and a narrow set of complaints will be addressed to the regulators. The regulatory authorities still have a role to play.

Those practices relate to AMD’s challenges to how Intel structures its pricing. AMD and Intel don’t have agreement on retroactive rebates and discounts. Some of the practices relate to end user discounts too.

Tom McCoy, AMD’s legal counsel described the agreement as a pivot from war to peace. Intel and AMD are trying to move forward in a way that will make everyone proud of the industry.

AMD said that the spun off manufacturing division of AMD, Global Foundries, is well positioned to establish itself as leading player in the industry. The agreement is of value to Global Foundries.

So what are the broad rules Intel has agreed to? McCoy said that AMD thought the broad rules gave customer access and opens the way to channel partners and multinational vendors to have freedom of choice. He said the agreement will be made totally public as quickly as both companies can achieve that.

He said the key points are that Intel will not be able to use inducements to force exclusive dealing, delaying or prohibiting companies from marketing or advertising AMD products, withholding benefots from vendors. AMD and Intel have also agreed to certain technical practices. Compilers will not unfairly or artifically impair the performance of AMD products. Intel has no obligation to help AMD, but has an obligation not to do things designed to hurt AMD, he said.

Building relationship, trust. Graphics products coveredAMD is trying to reset the relationship between it and Intel. It’s been intense, emotional and acrimonious for many years. “The one thing I’d say that is a touchstone of our negotiations were that we were going to be fierce competitors in the marketplace, we wanted to be respectful, and we wanted to have a normal healthy relationship.” There will be procedures in the agreement to build relationship and trust before spilling into the courts or the public affairs domain.

Dirk Meyer said that the agreement gives AMD and Global Foundries more flexibility and paves the way towards Global Foundries and Chartered for a merger. He said that the patent cross license was broad and covered all products, not just X86 disputes. That implies graphics products too.

Dirk Meyer said that the agreement gives AMD and Global Foundries more flexibility and paves the way towards Global Foundries and Chartered for a merger.

As part of the agreement, AMD will drop regulatory complaints it has made against Intel throughout the world. It’s not clear at press time what will happen to the stream of follow up antitrust claims made by individuals and ambulance chasing lawyers in the wake of the AMD civil action that started in Delaware. The Delaware antitrust case was due to come to court in spring 2010.

While $1.25 billion is a lot of money for Intel to pay to AMD, there’s no admission of guilt from the chip behemoth that it did engage in antitrust activities.

Both companies are now free to carry on competing against each other. McCoy’s statement that peace has broken out between Intel and AMD is interesting. It remains to be seen how this will pan out in the future.

UPDATE: Paul Otellini, CEO of Intel, said in a later web conference call that the AMD antitrust case had been massive and promised to become even more so as the trial approached. He said there had been 200 million documents and thousands of pages of expert evidence. He said: “We have competed fairly and legally. The vast majority of antitrust cases settle out of court because of their complexity and because under US laws the damages are tripled.”

He said that AMD and Intel took a step back. After lengthy negotiations that began last spring Intel and AMD found a way to put these matters behind us and move forward. He said: “We continue to believe our discounts are lawful and in the best interest of consumers and the marketplace.”

Intel has negotiated a separate deal with Globalfoundries that allows it to manufacture AMD products and protect Intel intellectual property.

He said that while Intel and AMD have ‘resolved our disagreements’, there are other matters Intel will continue to actively resolve. There are class actions in Delaware and Intel is appealing against the European Union.

He said that Intel strongly disagreed with the recent decision by the New York Attorney General to investigate its practices. He said: “Rebates are legal and it’s unfortunate the Attorney General chose to distort the facts.”

AMD and Intel will submit the agreement between them to the SEC later today.